A $900,000 no-bid contract awarded by the Illinois Division of Insurance to a politically connected attorney for a study of brokerage contingency fees has become a state election campaign issue.
The matter was spotlighted when the Chicago-Sun Times reported on the award of the contract to Myron "Mike" Cherry, a Chicago attorney who has made political donations to Democratic Gov. Rod R. Blagojevich.
Joe Birkett, the Republican candidate for Illinois lieutenant governor, was quoted as calling it a "sweetheart contract" by the governor's administration.
Illinois began looking at contingency fees after New York Attorney General Eliot Spitzer sued Marsh & McLennan Companies charging that Marsh brokerage, in return for lucrative volume-based contingent fee commissions that served as illegal kickbacks, rigged bids and steered insurance contract placements.
Mr. Cherry is linked to Gov. Blagojevich through $60,000 in campaign contributions to the Democrat, the Sun-Times reported.
Mr. Cherry's law firm lost out on a $250,000 consulting contract involving the Teachers Retirement System by not participating in the negotiating process. The allegation is that six months later, through his political connections, the Department of Financial and Professional Regulation hired his firm to work on the negotiations that resulted in several multimillion-dollar settlements with brokers.
Susan Hofer, a spokeswoman for the Department of Financial and Professional Regulation, told National Underwriter that Mr. Cherry's law firm worked as a special examiner from Dec. 2004 to May 2005.
The department hired the firm under legal provisions that allow the department to hire people when it lacks the expertise on staff.
Ms. Hofer said the law firm was hired for its expertise in class action suits to find individual injured parties to amass a class. The department also sought a firm with no ties to the insurance industry.
The fee collected by Mr. Cherry's law firm was paid by the brokers, and did not come out of the monies paid into the settlement, according to Ms. Hofer
The department has refused to release the billing records of Mr. Cherry's firm, saying that it would jeopardize continuing investigations into the matter.
Ms. Hofer said the information Mr. Cherry's firm unearthed was analyzed by the department and shared with others in reaching the settlements, which amounted to $260 million for Illinois residents.
"The settlement figure would suggest that the work he did was useful," she remarked.
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